It's nothing unusual for a higher-end display to have some sort of processor in it (and hence require firmware) even if it's only for 'control' purposes - since that's generally more economical than including loads of discrete circuitry to handle control etc. The Thunderbolt Display certainly
had firmware. I think people are placing far too much significance on the SD having an A13 chip and (apparently) running iOS (maybe just the kernel and a few relevant frameworks) - that's just Apple sensibly not re-inventing the wheel.
I have no idea whether or not the A13 in the SD is used for "basic" things like video scaling (e.g. 4k to 5k when you plug in some iPads) but that's certainly true of many 4k TVs that include powerful (usually) ARM-based SoCs - they don't just get used for the obvious "smart" features.
No iOS device ever
just stopped working because the iOS version got too old - although it may well have been unable to run the latest apps or lost compatibility with some (maybe critical) online service, or had some critical security vulnerability, but that's irrelevant to s Studio Display that doesn't directly connect to a network and doesn't have user-installable Apps. It's established that the SD will even work as a
display with PCs.
My previous LCD TV stopped receiving updates after a couple of years and rapidly became useless for running the built-in Netflix etc. apps but it never ceased functioning as a basic TV or display for external media players... and Apple have a better track record for supporting iOS on older devices than many other phone/TV/etc. makers.
There's no guarantee that future versions of MacOS won't lose support for some of the fancy features of the display - or at least the webcam or sound - but doing that in the foreseeable future would be a very shabby move by Apple, and is a risk with
any hardware. Heck, good luck charging your new MagSafe 3 MacBook Pro from the MagSafe 1 connector on the Thunderbolt display...
Using iOS rather than some one-off custom firmware gives Apple
less excuse for not keeping it updated.